Sant v. Baril

566 P.2d 48, 173 Mont. 14, 1977 Mont. LEXIS 633
Montana Supreme Court·Decided June 9, 1977·No. No. 13180·Published·Cited by 5 cases

Opinion

MR. JUSTICE DALY

delivered the opinion of the Court.

This appeal arises out of two causes of action which were consolidated for trial by jury in the district court, Madison County. The first cause is a suit for damages under a land lease executed between lessors, A. R. Smith and Laura Smith, and lessee Arthur H. Sant. This suit was brought by Arthur H. Sant and Edna Sant (Sants), against the Administratrix of the Estate of A. R. Smith (Administratrix). Plaintiffs appeal from the district court granting defendant’s motion to dismiss, after plaintiffs presented their case and rested.

The second cause is a suit to recover on a promissory note held by the First National Bank of Twin Bridges, Twin Bridges, Montana, and executed by the Sants and their son, Robert Sant. The promissory note was assigned to the Administratrix and suit was brought by the Administratrix against Robert Sant. The district court treated this action as a counterclaim. Robert Sant appeals from the district court’s order directing the jury to return a verdict for the Administratrix.

[16]*16In First National Bank v. Sant, 161 Mont. 376, 506 P.2d 835, this Court discussed some of the legal problems existing in the present action. As a means of introduction and clarification, we review our holding in that case.

In First National Bank v. Sant, supra, the Sants appealed from a district court judgment granting foreclosure on their real and personal property. This judgment of foreclosure was rendered in favor of the First National Bank of Twin Bridges which sought to foreclose on a mortgage executed by Arthur H. Sant on July 9, 1970, and held by the First National Bank of Twin Bridges. The mortgage instrument was entitled “(Plan of Paris Robert)”. Paris Robert was the president of the First National Bank of Twin Bridges. The plan purported to relieve the Sants of liability for certain creditor debts and balances due the bank on existing notes. This release was to be accomplished through the bank’s disbursement of funds made available to the Sants by virtue of their executing three promissory notes. The notes were in the amounts of $17,690.62; $2,788.05; and $12,968.74, and each bearing interest at the rate of ten percent per annum. Certain real and personal property of the Sants was listed as collateral for the mortgage and $50 was charged by the bank as an expense for organizing the credit plan and overseeing the payments.

The plan was divisible into three parts with the promissory note for $17,690.62 and $2,788.05 to mature February 5, 1971; while the note for $12,968.74 matured on April 1, 1971. At the time First National Bank v. Sant was heard none of the promissory notes had been paid by the obligors. The notes for $2,788.05 and $12,968.74 were held by the bank and no actual disbursements were made to Continental Oil Co. via Russell Lepp, or to A. R. Smith, both listed as corresponding creditors to these notes. It is the $12,968.74 debt which confronts us in the instant case in the form of the July 9, 1970 promissory note and the assignment of that note. The plan indicates the $12,968.74 debt was a consolidation of debts owed by the Sants to A. R. [17]*17Smith. Specifically, these debts are listed as an old promissory note of $8,240; $728.74 in interest on this old note; and $4,000 consideration for a 1970 lease. These items are of importance later in this opinion.

We held in First National Bank v. Sant that the bank was barred from foreclosing on the promissory notes in the amount of $2,788.05 and $12,968.74 and the Sants were entitled to a credit in the amount of $1,214.32 on the promissory note for $17,690.62. The basis for the $1,214.32 credit was the finding that while the bank had charged $50 as expense for setting up the plan and had charged ten percent interest on the promissory notes, Paris Robert, as agent for the bank, had secretly negotiated with the Sants’ creditors for discounts or rebates as a collection fee. We found the bank’s failure to disclose such negotiations a breach of a duty owed the principal by his agent and held the Sants entitled to the amount of the rebates, $1,214.32.

The basis for denying the bank foreclosure on the $2,788.05 and $12,968.74 promissory notes was the finding that the notes were not supported by legal consideration. For example, the $12,968.74 promissory note was purportedly executed to evidence debts owed by the Sants to A. R. Smith. However, the promissory note was drafted and held by the First National Bank of Twin Bridges and executed by the Sants and Robert Sant. Since there has never been a showing of any oral or express trust, partnership, agency, joint venture or other such relationship between A. R. Smith and the bank, the promissory note is void for the purpose of establishing the $12,968.74 debt between A. R. Smith and the Sants. The only evidence of any agency relationship is the penciled words “A. R. Smith Trust” which emboss the promissory note and were allegedly written by Paris Robert. In First National Bank v. Sant we set forth those policy reasons which directed why such evidence should not be equated with an express or oral agreement creating a partnership, agency, or trust relationship and, though we refrain from repeating those policy reasons here, we affirm the basis for that holding.

[18]*18We note that First National Bank v. Sant never discussed the legal sufficiency of the debts embodied in the $12,968.74 promissory note:

“This holding does not affect any preexisting or present debt between Sant and Smith * * 161 Mont. 387, 506 P.2d 841.

That case held only that the $12,968.74 promissory note could not be sued upon because it was not supported by legal consideration. Such a holding is fatal to any attempt by the Administratrix here to collect on the same promissory note assigned by the bank, apparently without consideration. Any attempt by the Administratrix to recover a debt of $12,968.74 must be by an action independent of the promissory note and must be proven by evidence establishing an obligee/obligor relationship. A suit to recover on the promissory note held by the bank and executed by the Sants and Robert Sant fails to establish such a debt.

Therefore, we hold the district court erred when it directed the jury to return a verdict for the Administratrix on the counterclaim to recover on the promissory note and that action is dismissed.

The remaining issue is whether the district court erred when it granted the Administratrix’ motion to dismiss after the Sants had presented their case and rested in the action for damages under the land -lease. We initially recognize that counsel for the Administratrix incorrectly moved for dismissal in this jury trial and the district court inadvertently granted the motion. Rule 41(b), M.R.Civ.P., is controlling:

“(b) INVOLUNTARY DISMISSAL - EFFECT THEREOF. For failure of the plaintiff to prosecute or to comply with these rules or any order of court, a defendant may move for dismissal of an action or of any claim against him. After the plaintiff, in an action tried by the court without a jury, has completed the presentation of his evidence, the defendant, without waiving his right to offer evidence in the event the motion is not granted, may move for a dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief. The court as [19]

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Sant v. Baril, 566 P.2d 48, 173 Mont. 14, 1977 Mont. LEXIS 633 (Mo. 1977).

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